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  • Ian McCormack

Government and Business – exactly the same but different

It’s municipal election season here in Alberta, and candidates and their supporters are testing the sound bites. Among the typical assertions are that local government needs change, that it needs to be more transparent, and that it needs to listen to citizens better. The assertion I want to provide my two cents worth about is the not uncommon refrain that government needs to “run like a business”. I guess I understand that superficially, but it doesn’t hold up under scrutiny. I buy the argument that government can be run on businesslike principles. Still, as institutions dedicated to the public interest, governments are required to do things and operate in ways that no business would do. By the same token, no business would operate exactly like a government. For that reason, I don’t think government should be run the same way a business would be run. Let’s look at the core principle of business – and government, for that matter – sustainability. For a business to sustain itself, it must bring in more money than it sends out. That applies to the small independent grocery store in every town in the country. It also applies to substantial multi-national corporations. There’s a saying about this: ‘if your outgo exceeds your income, then your upkeep will be your downfall.’ That applies to governments too. Sustainability in government relies on having the operational resources to carry on the business of providing programs, services, amenities, and facilities that are needed or desired by the municipal population. This last point is all about return on investment – or ROI. For a business, the ROI is financial. The business needs to provide some return to the owner or shareholders to remain a viable entity. While a positive return doesn’t happen every year for every business, it needs to happen often enough that it makes sense to continue to operate. Municipalities need a positive ROI too, but unlike business, the ROI is often social. There is something that attracts people, families, businesses, and organizations to a place. While some would suggest it’s purely a financial gain (lower taxes than next door), that’s often not the case. If you haven’t done so, look up the fascinating arguments in Mark Anielski’s book The Economics of Happiness and An Economy of Well-being. Financial ROI is absolutely part of the municipal equation; however, most municipalities in Canada can rely on at least some guaranteed revenue in the form of property taxes. Interestingly there are some exceptions to this rule in the Territories. In the US, the situation is also different, with a wider variety of fifinancial tools available to municipalities. The ideas in this blog have been about ROI, but other businesslike principles can easily be adapted and applied to municipalities. Among these are accountability, respect, value, clarity of role, clarity of purpose – pretty much all the principles that I speak to in much more detail in the second half of my book Who’s Driving the Grader and Other Governance Questions. As always, I’m interested in your thoughts about this topic. Are there principles that apply in business that just don’t fit within a municipal context? How about municipal principles that won’t work in a business? Do you buy my suggestion that government can be run on businesslike principles? You can find me at ian@strategicsteps.ca. The company’s Twitter profile is @strategic_steps. Edit




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